Geoff Sullivan

Geoff is a technology marketer focused on the cloud infrastructure and software defined networking space. Geoff is an avid researcher and analyst of new technologies and is interested in blockchain use-cases beyond financial systems.

Blockchain’s Energy Problem and the Need for Renewable Processing Power

3 minute read

Energy consumption is one of the biggest critiques of cryptocurrency and
blockchain asset mining worldwide. According to the Bitcoin Energy Consumption
Index1 Bitcoin mining
alone consumes more energy than Denmark, Belarus and Bulgaria do as individual
countries. Some blockchain networks, like Ethereum,
are moving away from mining as the mechanism for verifying asset transactions,
but the Crypto Noobs are taking a different approach. We think mining is the
future, and we’re solving this problem with good old fashioned renewable energy.

Let’s take a look at why we like mining, and why we think Renewable Processing
Power(RP ²) is the future of sustainable blockchain technology.

The Significance of Mining

Blockchain asset
mining, AKA Proof of
Work (PoW,) is the popular protocol and foundation for the distributed
architecture of many leading blockchain networks like Bitcoin and Litecoin.
Mining serves two main purposes:

Validating blockchain transactions between parties with transparency and
consensus across the network.

Rewarding miners for that work by releasing new assets, AKA “block rewards”.

There is some important spinoff functionality of these two major purposes. Let’s
take a look at them.

Creating a Baseline for Value

Miners need to be rewarded because they incur costs for the work that they do.
For instance, miners need to own specialized computers to perform the mining
work. Those specialized computers require large amounts of power to perform the
task of mining. You could argue that the time and effort to keep miners online
24/7 is another cost input. In essence, these cost inputs creates a baseline
value for the assets that are created by the mining process.

Securing All Things

The fundamental security feature of blockchain networks is the distributed
architecture, rather than a centralized architecture like a financial
institution. The networks run on miner’s mining computers, rather than a bank’s
data center - distributed nodes rather than centralized servers. The more miners
there are, the more distributed the network becomes and the more secure, as a
result. All of this makes malicious attacks like hacking and Denial of Service
(DoS) very difficult for hackers to achieve.

Proof of Work vs. Proof of Stake

Some blockchain networks, like Ethereum, are moving away from mining and the
proof of work model in an effort to combat the blockchain energy consumption
problem. The new architecture is called “Proof of Stake” or POS. The goal of POS
is very similar to Proof of Work - decentralization, transparency, consensus. But
the approach is much different. With POS, miners are referred to as “forgers,”
and like their mining counterparts, their role is to validate transactions on
the network. Forgers are selected from a pool based on their holdings of a
specific blockchain asset. The more they hold, the more they can forge. It is
easier to validate a forger’s stake in an asset than it is to solve a complex
mathematical equation (like in mining,) so there is no requirement for highly
powered, specialized computers and the large amounts of electricity that they
use. There is no block rewards in POS, instead forgers are entitled to the
network transaction fee.

There are some inherent socioeconomic and security issues with the POS model that
make it less than ideal to solve the blockchain energy consumption problem.

The Rich get Richer

One major side effect of POS is the 51% problem. Because participation in the
network is based on how much holdings a forger has, those with the most holdings
will have the most power. This creates economic inequality and disparity among
asset owners.

In Ethereum’s journey to POS, early indications are that the minimum stake
required to participate in network will be between 1250 and 1500 ETH. In today’s
market that is equivalent to $1,750,000 - $2,105,000 CAD, pushing the average
cryptocurrency trader out of eligibility.

The “51% Attack”

The aforementioned problem with POS, also comes with a security risk that is
much more likely than in PoW models. The “51% attack” is when a group owns the
majority of a blockchain network’s resources and can leverage that power to
manipulate how the blockchain was designed to work, for their own benefit.

Making Mining Sustainable

As supporters of the PoW model, the Crypto Noob Club is dedicated to solving the
blockchain energy problem the same way many other industries are. Renewable
energy. We believe that tightly coupling and scaling demands in processing power
harmoniously with supply in renewable energy is a solution with many use-cases
where large amount of processing power is required.

Renewable Processing Power (RP ²)

We are currently testing our renewable processing power technology within the
Crypto Noob Mining Club (CNMC) with the goal of reducing the club’s operational
costs and increasing member profitability. In parallel to this we are building
relationships within the renewable energy sector, identifying the right partners
to help make our vision a reality. We hope to take our lessons learned and
apply them to larger renewable processing power projects that we have in the
pipeline.

For news and updates on our renewable processing power initiative, subscribe to
our mailing list here.

The index is based on a number of assumptions that can be found
here. Leading
blockchain researchers have claimed that in order to have an accurate estimate
of the Bitcoin network’s total energy consumption, an index would need access to
hard data from Bitcoin miners themselves, which currently they do not.

The accuracy of the Bitcoin Energy Consumption Index is widely debated. ↩

Share on

You May Also Enjoy

We’ve written before about the different types of cryptocurrency miners that exist. Our Mining 101 highlights how GPU and CPU miners differ from ASIC miners. Today we want to touch on some new trends and market developments pertaining to mining technology and how some are leveraging it to manipulate the blockchain markets.

Last month I had the great (GREAT) pleasure of attending the world’s largest Blockchain Hackathon ever, in Denver Colorado: ETHDenver.
This was the second ever official Ethereum hackathon, following the ETHWaterloo hackathon that took place in Toronto Ontario late last year. During the event in Denver they also announced the formation of ETH Global, which will be organizing and rolling out similar events around the world.

Let’s face it. Swapping cryptocurrencies is a pain. Especially for a crypto noob. In fact, one of the most common questions we get from those new to cryptocurrencies is ‘how can I easily convert coin X to coin Y?’ If you’re dealing in common cryptos like Bitcoin or Litecoin, this can be achieved easily via an exchange that trades in both. But as traders begin to explore the world of altcoins, this can become more of a challenge. Until you discover ShapeShift.io

For those who have been following the Crypto Noob Mining Club’s journey to production, we’re finally here! The miners are up and running and we’ve just completed our testing phase. Here’s what we’ve learned